Homebuilders, foresters optimistic about 2013

While there is still a long way to go to full recovery, two Mississippi industries – homebuilding and forestry – are expecting another bounce-back year in 2013.

“There certainly is no housing boom going on,” said Marty Milstead, executive vice president of the Home Builders Association of Mississippi. “Some of our members are very, very busy; some need more work. But, at least the trend is positive. Don’t get me wrong – we’ll take it. We have been on the bottom, and on the bottom for a while.”

forestsMilstead said the industry faces challenges, including a very soft spec house market and tough mortgage environment. A healthier fix would be more job creation, he added.

But, interest rates are still attractive, and home prices continue to rise. According to the latest Residential Price Index from Oxford-based FNC Inc., U.S. home prices in March increased for the 13th consecutive time despite job market weakness and modest economic growth.

The report found signs of a freer mortgage industry, writing: “Low interest rates continue to be a key driver of rising housing demand. The market is also gaining momentum on signs of improved credit and more availability of leverage as mortgage lenders continue to experience rising profits.”

“We’re definitely seeing an uptick,” Milstead said. He added, “When you’re trying to go from 0 to 100, at one point you’re only doing 30. But, that’s way better than 0. Quite frankly, though, there is nowhere to go but up for the state’s homebuilders.”

Perhaps the only group happier than the homebuilders about the housing market rebound is foresters. For those in the timber industry, the bottom fell out well before the housing bust and recession.

And, what is bad for foresters is bad for the rest of state’s economy. Forestry is the state’s third-largest agricultural commodity, ringing in at $1.03 billion and approximately 125,000 land owners, according to the Mississippi Department of Agriculture and Commerce.

Steve Butler, owner of TimberCorp Inc. in Brandon, said Hurricane Katrina in 2005 flooded the market with storm-damaged trees causing prices to plummet. Butler said foresters advised owners to hold out for a more attractive market, only to see the housing bust/recession ruin that plan.

Robby Toombs, regions manager at Resource Management Service, LLC, and president of the Rankin County Forestry Association, has been in the industry since the 1970s, and remembers the downturn in the 1980s well. However, he said the duration of the most recent market correction makes it unique.

“It has just lasted so long – eight or nine years now,” Toombs said. “That’s why it is such a relief things are at least trending in the right direction.

Both Butler and Toombs pointed to increased mill activity, including several mills that have reopened, have announced plans to begin cutting logs again or are increasing operations.

Butler said he assisted in the recent acquisition of a 32,000-acre package. As a service, he checked with approximately a dozen mills and “all the mill owners were happy.”

Toombs said he is optimistic about new housing starts, which are projected to hit 1.5 million in the U.S. in 2015.

“We may never get back to the peak we saw (before Katrina and the housing/economic turndown), but we are getting back to numbers we can live with, that will keep us in business.”

David Jones, assistant forest products professor with MSU’s Extension Service, said in statement that all timber products follow housing starts, and he, too, is encouraged by increased mill activity.

“Mills in Mississippi have increased production, and some that were offline are operational again,” Jones said. “The expansions are a significant change from the last five years, when most reports were closures.

“We are hearing announcements of new mills opening, such as the plywood plant in Louisville and pellet mills in south Mississippi. The Port of Pascagoula is dredging the river for barges to carry wood pellets overseas,” Jones said. “The communities closest to these mills will see a direct economic impact.”

“2013 is looking better than 2012 and much better than the last several years following the recession,” said James Henderson, assistant Extension professor of forestry at Mississippi State University. “The recovery for Mississippi’s timber markets will take time, but everything is finally heading in the right direction.

“The composite price for framing lumber for May is up 13.6 percent from the same period last year, but stumpage prices for pine sawtimber are not rebounding as quickly. In the first quarter of 2013, Mississippi pine sawtimber average stumpage fell to $26.07 per ton. By comparison, pine sawtimber averaged $39.71 per ton in the first quarter of 2007.”

 

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